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Attorney E-Newsletter

December 2007

This month we honor a great Pennsylvanian1, Benjamin Franklin, who was born 302 years ago on January 17.

RPC 6.3: Membership in Legal Services Organization

At this time of the year we should salute those lawyers who apply their skills to serve those in need. Some do this through pro bono work. Others serve on boards of legal services organizations that provide legal assistance to the poor.

But, as Claire Booth Luce observed, no good deed goes unpunished, and some lawyers who have volunteered to serve on the boards of legal services organizations have faced questions of whether this service disqualifies their firm from cases in which the legal services organizations represent clients.

Rule 1.10(a), which addresses conflicts within firms, is quite strict. It states, "While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7, or 1.9."

A lawyer's membership on the board of an organization can be a fiduciary interest that disqualifies the lawyer's firm from representation adverse to the organization, even in the absence of a client-lawyer relationship with the organization. American Dredging Co. v. City of Philadelphia, 480 Pa. 177, 389 A.2d 568 (1978). Applied rigorously, a lawyer's membership on the legal services organization board could be construed to disqualify not only the lawyer, but the entire firm from the adverse representation.

Rule 6.3 addresses this situation and provides relief from strict application of the disqualification language. The rule specifically states, "A lawyer may serve as a director, officer or member of a legal services organization, apart from the law firm in which the lawyer practices, notwithstanding that the organization serves persons having interests adverse to a client of the lawyer." The second sentence of Rule 6.3 seeks to preserve the independence of the organization by prohibiting such lawyers from knowingly participating in a decision in which the decision could have a material adverse effect on the organization's client, or would be inconsistent with the lawyer's own obligations under Rule 1.7. The comments specifically note that "If the possibility of such conflict disqualified a lawyer from serving on the board of a legal services organization, the profession's involvement in such organizations would be severely curtailed," and recommend that the organization have written policies to provide assurances that such conflicts will be avoided.

Innocent, But Not Insured

If you would know the value of money, go try to borrow some; for he that goes a-borrowing goes a-sorrowing.

The United States District Court for the Middle District has handed down a decision with significant implications regarding the availability of malpractice insurance for firms faced with misconduct by firm members.

The decision, Westport Insurance Corporation v. Hanft & Knight, P.C., et al., was rendered December 10 by Judge John E. Jones, III of the Middle District. This was a declaratory judgment action brought by a malpractice carrier seeking to refuse a duty to defend or indemnify a law firm.

The facts were that the senior partner in the firm had, over the course of several years, borrowed large sums of money from a client under terms unfavorable to the client, leading them to believe he was investing it in real estate ventures. In fact he used the funds to pay gambling debts. When informed that his conduct was under investigation, the partner took his own life. Subsequently, the clients brought suit against the deceased lawyer's estate and against his law firm, and sought in the declaratory judgment action to compel the malpractice insurer to indemnify.

Judge Jones found that the insurer had no duty to defend or indemnify under policy exclusions relating to personal profit, incidents of which the lawyer had prior knowledge, and acts of dishonesty and conversion or misappropriation. The clients argued that their claims against the law firm should still be covered, as the firm was an "innocent insured" without knowledge of the partner's misconduct. However, Judge Jones found that the language of the policy applied the exclusions to the acts of "any insured" and so that the law firm was not protected.

The appeal period on Judge Jones' decision had not run at press time, so it may still be subject to review or reconsideration. The opinion is posted at the Web site of the Middle District.

Per Curious

And whether you're an honest man, or whether you're a thief, Depends on whose solicitor has given me my brief.

Willow Grove appellate attorney and law blogger ("How Appealing") Howard J. Bashman provides some interesting thoughts on per curiam opinions in a column at www.law.com.

"Per curiam" literally means "By the Court." Its significance, however, is not always clear; the editor once handled a disciplinary case that turned on the question of whether a particular judge of the court would be deemed to have participated in a per curiam opinion.

This is a significant concern in the disciplinary system, where most disciplinary decisions consist of a written report of the Disciplinary Board, resulting in a per curiam order by the Supreme Court imposing discipline which may or may not be the same as that recommended by the Disciplinary Board. These Board Reports make up most of the body of law regarding disciplinary issues in Pennsylvania, and are generally cited by attorneys and Board members as providing guidance for subsequent cases, although they are generally not thought to be controlling in the absence of a written opinion by the Supreme Court. Board Reports since 2000 are catalogued at the Disciplinary Reporter at www.padb.us and set forth in full at www.aopc.org; reports prior to 2000, as well as a subset of more recent reports, were published in the Pennsylvania District and County Reports.

F.A.Q.: Frantically Asked Questions

Perhaps the history of the errors of mankind, all things considered, is more valuable and interesting than that of their discoveries. Truth is uniform and narrow; it constantly exists, and does not seem to require so much an active energy, as a passive aptitude of the soul in order to encounter it. But error is endlessly diversified; it has no reality, but is the pure and simple creation of the mind that invents it. In this field the soul has room enough to expand herself, to display all her boundless faculties, and all her beautiful and interesting extravagancies and absurdities.

Q: I don't handle client funds in my practice. Do I still have to pay the assessment for the Client Security Fund? If so, why should I? No one is losing money because of me.

A: Yes, the annual assessment for the Pennsylvania Lawyers Fund for Client Security is required of all lawyers who practice law in Pennsylvania, even those - law professors, corporate and government attorneys, prosecutors and defenders, Disciplinary Counsel - who do not handle client funds. The assessment for the PLFCS is not an insurance premium; it is a recognition of the profession's collective responsibility to assure the welfare of clients who rely in good faith on the integrity of the bar. The payment is small for such a solemn obligation.

Gotta Tip?

Or a comment, a question, a request, a suggestion? Let us know at comments@padisciplinaryboard.org.

1Actually he was born in Boston2, but he came to Philadelphia as a teenager, and as anyone who has raised teenagers knows, that's the hard part. So we get him.

2Besides, Boston, you have two crisp new World Series pennants and a football team which can apparently play the Heavenly Hosts and come away with four touchdowns and a couple of field goals. So throw us a bone, will you?